And OPEC needs shale producers to be cautious in growing output to avoid undermining its policy of supply restraint.
U.S. shale production is dispersed among dozens of companies which makes coordination with them exceptionally difficult because of the free-rider problem.
BOOM-BUSTOPEC members, shale producers and the rest of the oil industry would all like to see a further rise in oil prices and avoid another crash.
ANTITRUSTEven more ambitiously, OPEC seems to want some form of understanding with shale producers based on their mutual interest in avoiding another price collapse.
Shale producers cannot partner with OPEC to help manage oil supplies and prices — even if both sides were interested in an accord.
Will OPEC end its truce with shale drillers?
With oil companies benefiting from lower service costs, Shell reckons it can drill a well today for about $5.5 million, down a whopping 56 percent from 2013.
“North American oil companies are going to increase their spending by 25 percent in 2017 compared to last year,” said Daniel Yergin, the oil historian-cum-consultant who hosts the CERAWeek.
In Midland, the Texas city at the center of the Permian basin, the activity rush is palpable, as is the threat of higher costs for shale companies.
Now, it’s OPEC that’s seeking solutions, desperate to drive prices up even further in a push to repair the economies of the countries it serves.
“Today, almost every single shale basin is economic in the $35-$50 a barrel price range,” said Regina Mayor, head of energy at KPMG LLP in Houston.
U.S. shale surge threatens OPEC strategyBy Christopher Sell on 2/28/2017LONDON (Bloomberg) — OPEC’s Nov. 30 output agreement to cut production by 1.2 MMbpd may have put a floor under the oil price, but has also awakened U.S. shale.
Since September, output has been rising at an average rate of 93,000 bpd, according to Bloomberg Oil Strategist Julian Lee, and is now back above 9 MMbpd.
Booming shale isn’t the only problem for OPEC.
The question on everyone’s lips now is: Will OPEC extend the cuts after six months?
OPEC’s Nov. 30 deal to cut production by 1.2 MMbpd — led by Saudi Arabia — at present appears to be holding.
collected by :John Locas